FT Article from 2023 re Carney and Staley.
Two court cases in the US are threatening to see senior bankers deposed
www.ft.com
Edited to create paragraphs
JPMorgan Chase were able to avoid questions about their decision to keep Jeffrey Epstein on as a client while the convicted sex offender allegedly trafficked and abused dozens of teenage girls.
Now, more than 20 employees at the US bank, including star managers, are having their communications scrutinised in two lawsuits, and some are set to testify under oath about their alleged involvement.
As more senior staff get dragged in, lawyers for JPMorgan are trying to prevent chief executive Jamie Dimon from being deposed in the suits brought by an alleged Epstein victim and the US Virgin Islands, where the disgraced financier had a home.
At the heart of the cases are a trove of emails between JPMorgan employees that provide the fullest picture to date of the bank’s internal deliberations over its relationship with Epstein, who died by suicide in 2019 while awaiting trial.
Newly redacted excerpts of 1,200 emails between Epstein and Jes Staley, then a senior private banker at JPMorgan before becoming Barclays’ chief executive, have piled renewed pressure on the board of the UK bank. The Barclays board had backed Staley before he was forced to resign because of the emails, some of which contained unexplained references to “Snow White” and “Beauty and the Beast”, while others would eventually be shown to contain what the US Virgin Islands lawsuit describes as “photos of young women in seductive poses”.
JPMorgan’s Epstein problem.
Senior JPMorgan figures such as Mary Erdoes — the head of the bank’s $4tn asset and wealth management business — could face hours of questioning this month, according to court filings, as the cases move closer to trial. Erdoes, a 27-year JPMorgan veteran and one of Dimon’s top lieutenants, is the highest-ranking person within the bank set to be deposed, having held senior supervisory roles and led the division which managed Epstein’s money. “Mary has always acted with the highest levels of integrity and professionalism and she informed this client 10 years ago that his relationship with our firm was being terminated,” said JPMorgan in a statement.
At issue in both cases is whether JPMorgan is liable for facilitating Epstein’s sexual abuse by failing to spot and act on red flags. The bank’s lawyers have described the Virgin Islands complaint as “meritless”, and the alleged Epstein victim’s complaint as “directed at the wrong party”. Hundreds of thousands of documents detailing internal communications at JPMorgan among 23 members of staff — including Erdoes — are set to be given to the plaintiffs’ legal teams. Lawyers for all sides are still arguing over whether Dimon’s communications will be handed over. Mary Erdoes, a 27-year JPMorgan veteran, led the division which managed Jeffrey Epstein’s money © Hollie Adams/Bloomberg
The court documents have shown evidence that JPMorgan executives overlooked at least five warnings by its risk and compliance teams about Epstein’s links to child trafficking and molestation of young girls. JPMorgan knew it had an Epstein problem as early as 2006 when its global corporate security division alerted executives to reports of Epstein’s indictment in Florida on charges of soliciting minors. By that point, Epstein had been a client for eight years at JPMorgan’s private bank. Despite the warning, JPMorgan kept Epstein’s business but classified his account as “high risk”, a tag which requires special approval.
In 2007, an Epstein victim was allegedly paid $10,000 in hush money after being raped in the US Virgin Islands, which her lawyers claim Epstein’s accomplices withdrew from JPMorgan in cash. Epstein ended up pleading guilty in 2008 to soliciting prostitution, including from a minor, and served 13 months in a county jail. It was around that time that one JPMorgan employee wrote in an email that Epstein’s estimated $120mn with the bank would likely leave that year “as I can’t imagine it will stay (pending Dimon review)”. JPMorgan said the bank has “found no record of, nor does [Dimon] recall, such a review”.
Endorsing Epstein
Starting in 2008, the court filings point to the crucial role Staley allegedly played in protecting Epstein’s relationship with JPMorgan. Staley, a 66-year-old American who worked at JPMorgan for more than 30 years until 2013, developed ties with Epstein while an executive at its asset management operations. Staley later ran JPMorgan’s investment bank.Staley is alleged in the filings to have been involved in a 2008 decision to maintain Epstein’s accounts, alongside Stephen Cutler, who was then JPMorgan’s general counsel. Cutler also was included in at least one “rapid response meeting” over new information regarding Epstein’s human trafficking, the documents revealed. Cutler, who left JPMorgan in 2018, is another potential witness in the cases. He did not respond to requests for comment. A lawyer for Staley, who is not a defendant in the cases, declined to comment.In 2011, when one of the bank’s compliance directors asked Cutler to reapprove the Epstein relationship, Staley’s endorsement was again enough to protect Epstein’s position at JPMorgan. Despite new child trafficking allegations against Epstein, JPMorgan concluded there were “no material updates” and that Staley had “discussed the topic with Jeffrey Epstein who replied there was no truth to the allegations, no evidence and was not expecting any problems”. Just weeks after that fresh sign-off on Epstein in 2011, JPMorgan’s corporate security division flagged more news stories connecting him with child trafficking and molesting underage girls. JPMorgan kept Epstein on as a client for two more years, until he was flagged again in 2013. Epstein used accounts at JPMorgan to pay at least 20 of his victims, the Virgin Islands alleges. Staley left JPMorgan just months before Epstein’s relationship with the bank ended in 2013, joining hedge fund BlueMountain Capital before later taking over at Barclays in 2015.
Barclays’ Staley problem
On the other side of the Atlantic, the lawsuits’ revelations have renewed scrutiny of Barclays’ board, in particular its chair Nigel Higgins. Barclays knew about Staley’s close relationship with Epstein when it named him CEO and required him to fully disclose his history with the sex offender, according to multiple people involved in his recruitment. Aware of the potential damage of playing down the relationship, Barclays had stuck to a carefully crafted line — both with regulators and in public statements — that Staley and Epstein had a “close professional relationship” and were “friendly” outside of work.But the bank changed that description in 2019, when the UK Financial Conduct Authority made fresh enquiries following more media reports linking the pair and after it received from US regulators the cache of 1,200 emails. In a letter to the FCA, drafted by general counsel Bob Hoyt, now at HSBC, and signed by Higgins, it instead asserted that the pair did not have a close professional relationship. It was this that prompted the UK regulator to launch a full inquiry into whether Staley had been “full and frank”: the emails it had seen did not tally with a merely professional relationship, close or not. Barclays declined to comment and a spokesperson for HSBC declined to comment on Hoyt’s behalf. Mark Carney, then governor of the Bank of England, summoned the chair of Barclays’ board Nigel Higgins to a meeting in December 2019 to discuss the position of chief executive.
Jes Staley © Chris J Ratcliffe/AFP/Getty Images
In early December 2019, Higgins was summoned at 24 hours notice to see Mark Carney, then governor of the Bank of England, Andrew Bailey of the FCA, who has since succeeded Carney, and Sam Woods of the Prudential Regulation Authority, the people said. The supervisors strongly indicated to Higgins they felt Staley’s position was no longer tenable, according to people briefed on the report the chair made back to the board. Carney asked about succession planning and who would take over if he stepped down, the people added.Barclays spent the next two months — January and February — scrutinising the large amount of emails given to the bank by the FCA, with the assistance of law firm Clifford Chance. The law firm conducted interviews and produced a report for the board, which included the most controversial emails in an appendix. The remit of the board’s review focused on two questions: was there evidence of impropriety and was Staley “sufficiently” honest and transparent about the extent of the relationship when he joined the bank in 2015 and subsequently in 2019. The process did not ask the board to make a judgment on the appropriateness of his ties to Epstein in light of the information that has since been revealed. When Staley was interviewed, he said he did not remember what the “Snow White” email was in reference to, a position he still maintains, according to a person familiar with his thinking.The bank determined the messages themselves, while concerning, were inconclusive and not direct evidence of impropriety. There was no “smoking gun”, one person remembers, and they judged that Staley had been honest. They resolved to back him. Additionally, the board felt that without proof of what the emails meant, or evidence that Staley knew of Epstein’s crimes, they had no cause to remove their CEO, one of the people said. However, people familiar with the dossier of emails the bank received from the FCA say that it did not contain the photos of young women. Nor was the bank aware of the allegedly co-ordinated timing of wire transfers after emails between Staley and Epstein. For example, the complaint alleges that Staley planned to stay at Epstein’s Palm Beach, Florida residence in early 2009. At around the time of the scheduled visit, “Epstein wired $2,000 from his JPMorgan account to a woman with an eastern European surname,” it alleged. In late August that year, the lawsuit states Staley told Epstein he was visiting the UK. “Epstein inquired whether Staley would need anything while in London, and Staley replied, ‘Yep’. On 31 August 2009, Epstein wired $3,000 from his JPMorgan account to the same eastern European woman he paid in January 2009. ”Without that context, Higgins has said the emails did not seem as problematic and the board was making decisions without all the available information, said people familiar with his thinking. “I certainly wouldn’t have put my name to those statements supporting Staley had I seen them,” said one former board member. “Higgins has to be asked serious questions about his judgment at this point.”
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